Qualifying For Jumbo Loans

Qualifying For Jumbo Loans With Low FICO and No-Income Doc

Gustan Cho Associates are mortgage brokers licensed in 48 states

This guide covers qualifying for jumbo loans with lower credit scores and debt-to-income ratios up to 50% with traditional and non-QM loans.  Qualifying for jumbo loans with lower credit scores and a 50% debt-to-income ratio at competitive rates is possible at Gustan Cho Associates. Gustan Cho Associates are commercial and residential mortgage lenders.  Gustan Cho Associates has traditional and non-QM jumbo loans. Qualifying for jumbo loans has never been so easy, says Alex Carlucci:

This is a traditional jumbo loan program with only a 10% down payment requirement. Most lenders require a 700 credit score, 43% DTI, and 20% to 25% down payment. Gustan Cho Associates’ 90% LTV jumbo loan program with a 660 FICO minimum and a maximum 50% debt-to-income ratio is becoming a major hit among our borrowers of jumbo loans.

Gustan Cho Associates’ 90% jumbo mortgage program has a loan limit of up to $3.5 million loan limit cap. Any jumbo loans higher than 3.5 million dollars will be reviewed case-by-case. In the following paragraphs, we will cover qualifying for jumbo loans with traditional and non-prime mortgages.

Qualifying For Jumbo Loans Versus Traditional Conforming Mortgages

Another name for a jumbo mortgage is a non-conforming mortgage. This is a loan a lender makes you that doesn’t “conform” to the guidelines of Fannie Mae and Freddie Mac. Created by Congress in 1938 and 1970, respectively, Fannie Mae and Freddie Mac provide stability and affordability to the mortgage market. This is done by buying “conforming” mortgages from lenders, which gives lenders liquidity to make more mortgages. John Strange of Gustan Cho Associates explains qualifying for jumbo loans:

Qualifying for jumbo loans on non-QM loans such as bank statement loans require a 10% to 20% down payment. The down payment requirement depends on the borrowers credit scores. To qualify for a 10% down payment 12 month bank statement jumbo loan, you need at least a 700 credit score.

Fannie Mae and Freddie Mac only buy mortgages meeting their guidelines for the down payment, credit score, post-closing reserves, and loan amount. In 2023, a one-unit home’s conforming loan size limit was $726,200 nationwide. High-cost areas had significantly higher loan limits in certain high-priced markets. Loans exceeding the standard government or conventional loan limits are called jumbo mortgages. It is also called FHA jumbo loans, VA jumbo loans, and Conforming jumbo loans. It can also be called non-conforming mortgages.

Contact Us For Qualify Jumbo Loans With Lower Credit Scores

Why Are Non-Conforming High Balance Loans Called Jumbo Mortgages

There’s a reason that they are called jumbo mortgages. As one can infer, “jumbo” mortgages are loans with larger loan amounts than usual. The mortgage amount qualifies as “jumbo” and will vary from county to county based on local home prices.

A jumbo mortgage is anything written for $726,200 or more. Fannie Mae and Freddie Mac will not purchase mortgages exceeding common areas’ maximum loan limits.

Government and conventional loans have higher loan limits in other areas, where house prices are traditionally higher. And in some counties, the starting point for jumbo loans will be somewhere between those two numbers – set to correspond with the local home market.

Conforming Loan Limits

Want to find the starting point for jumbos in the neighborhood of your dreams? Check the county on this Federal Housing Finance Authority website. You might not know that the $726,200 minimum threshold for jumbos can change. The FHFA reviews the ceiling amount for conforming mortgages annually and announces the results each November as federally required. And if the maximum amount for conforming mortgages were to change, that also would reset the minimum for jumbo mortgages.

When Should I Use a Jumbo Mortgage?

Homebuyers use a jumbo mortgage when seeking a home loan amount greater than the conforming loan limit in the area. Home buyers in most countries use a jumbo mortgage if your loan exceeds $726,200. In certain high-cost areas, the conforming loan limits go above $726,200. Mortgage Loan Applicants must look up the area’s loan limits to know exactly. The FHFA site has this information. Ronda Butts, the editor in Chief for One Solution Real Estate and a dually licensed realtor and loan officer at Gustan Cho Associates, explains about high-balance FHA and conforming loans:

Many counties in California are high-cost areas. High-cost areas have higher FHA and conforming limits. The maximum FHA and conforming loan limits in high-cost areas for a single-family home is $1,089,300.

Certain lenders will categorize anything above $726,200 as a jumbo. This holds true even if the loan is made in a high-cost area with a conforming limit of $1,089,300. But don’t assume this applies to homebuyers in an area where the conforming limit goes above $726,200. Borrowers need to ask the lender they consult with what kind of loan they are eligible for. A good mortgage broker will inform you of your loan status as a jumbo.

Down Payment Requirement On Jumbo Mortgages

You may have to part with a bigger chunk of cash. Even so, the industry is seeing an uptick in the availability of loans with down payments in the 5 percent to 10 percent range, says Lynn Fisher, vice president of research and economics for the Mortgage Bankers Association. But those lower down payments often come at a price. Lenders willing to take a smaller percentage as a down payment often will increase the interest rate. Accordingly, Navy Federal’s Miller says:

There will be interest-rate bumps associated with the percentage you’re financing. Usually, the more you can put down, the better the interest rate you’re going to get.

Qualifying for Jumbo loans requires a larger down payment versus government-backed and conventional loans. A more expensive house usually means a larger down payment. But with a jumbo loan, the lender also might want a larger percentage of the home price as a down payment, according to several lenders.

Get Down Payment Requirement on Jumbo Mortgages

Qualifying For Jumbo Loans Versus Other Loan Programs

Jumbo mortgages have the same overall qualifying methodology as a conforming loan. Lenders will look at the credit score, down payment size, total monthly debt obligations relative to income (your debt-to-income ratio), and money left over after closing. Credit score requirements are about the same for conforming and jumbo.

A credit score down to 680 generally gets you the most available loan options. Albeit with a higher rate than borrowers get with a top-tier credit score of 780 or greater. As for money left over after loan closing — often called reserves or post-closing liquidity — jumbo loans will be more stringent than conforming.

Typically jumbo lenders want to see 12 months of reserves after the close, half liquid (in a checking or savings account), and half calculated from retirement assets. Conforming loan reserve requirements range from 0 to 12 months, depending on factors such as credit score, down payment, and DTI. Jumbo exceptions are available if your debt-to-income ratio is low and your down payment is high.

Mortgage Guidelines on Jumbo Loans

Jumbo loan approvals have some flexibility because conforming loans don’t have a higher debt-to-income ratio. For most conforming loans with 20 percent down or greater, lenders usually require that your total monthly housing payment plus all other monthly bills don’t exceed 43 percent of your income. But there can be some flexibility on non-conforming loans. For example, borrowers who documented substantial cash reserves left over after the loan closed might be able to get a jumbo loan with a debt-to-income ratio higher than 43 percent.

Income Guidelines Qualifying For Jumbo Loans

Flexible income calculations. Qualifying for Jumbo loans is tougher than traditional conforming loans. Jumbo income calculations can be more logical than conforming. For example, if you were in the same industry for 15 years and recently started your own business, a conforming loan would require you to show two years of filed self-employed tax returns.

A jumbo loan might only require one year of filed returns if you could document that the business was stable or growing. Less than 20 percent down with no mortgage insurance.

Down payments on jumbo loans can be as little as 10 percent for loan amounts of $3.5 million. Sometimes the loan amounts can be higher, translating into a $3.5 million purchase price or higher. Unlike conforming loans, these low-down jumbo programs don’t always require mortgage insurance. The trade-off for this flexibility is that most lenders will offer a rate about .25 percent higher and require 30- to 36-percent debt-to-income ratios for these low-down jumbos.

Apply For Jumbo Mortgage Loans

Jumbo Loan Credit Score Requirements

When you’re borrowing more, and the lender backs the loan, it may want a little more assurance that your credit is worthy, although each lender can have slightly different requirements. Gustan Cho Associates has traditional jumbo loans with credit scores down to 660. We also offer non-QM jumbo loans with credit scores down to 600 FICO:

Most lenders will not approve borrowers for jumbo loans with a credit score lower than 680; some require at least 700. However, Gustan Cho Associates has jumbo loan programs for borrowers with credit scores down to a 660 FICO. They typically cap the borrower’s debt-to-income ratio at 40 percent to 43 percent. Each lender may have specific things it wants to see.

For example, some lenders may look for signs of strong credit on your credit report. At PNC, jumbo borrowers need at least a 700 FICO score and three current or former credit cards or loans — called “tradelines” — in their credit history. And if a borrower doesn’t have a mortgage, the bank wants to see a year’s worth of rental records to show a pattern of managing household money.

How Do Jumbo Rates Compare to Conforming Rates?

How Do Jumbo Rates Compare to Conforming Rates?Before the financial crisis of 2008, jumbo loans typically had rates at least .25 percent higher than conforming loans because jumbo lenders were perceived as taking more risk-making loans that couldn’t be sold to government-backed Fannie Mae and Freddie Mac. This risk translated into higher consumer rates. In the years following the financial crisis, federal regulations have impacted rate markets, enabling banks to keep jumbo rates about the same as conforming rates. This dynamic can change over time, so ask your lender to compare options, especially if you’re in a high-cost area where you might be eligible for a conforming loan above $726,200. High-balance FHA and Conforming loans for 2023 are $1,089,300 on single-family homes.

Jumbo Mortgage Loans Versus Traditional Government And Conventional Loans

How Do I Qualify For Jumbo Mortgage Loans versus government and conventional loans? Qualifying for a jumbo loan is not much different than qualifying for a government and/or conventional loan with the exception of a higher down payment and higher rates. The jumbo mortgage process and the paperwork required by lenders are the same. The borrower’s credit scores and the down payment requirements can be different.

How Do Jumbo Mortgage Lenders View Jumbo Loans

Jumbo loans are considered higher-risk loans. In the event of a foreclosure, it will just take weeks or a few months to have a traditional home under contract. However, it may take months and/or years to sell a foreclosed higher-end home. The ability to repay a jumbo loan is an important factor analyzed by lenders.  Lenders will require a lower debt to income ratio on jumbo loans. Most lenders will require six months to 12 months of reserves on jumbo mortgages. Due to the higher risk factors for financing higher-end homes, lenders will charge a higher rate, require a higher down payment on jumbo loans, lower debt to income ratio, and/or reserves. Reserves are one month’s of principal, interest, taxes, and homeowners insurance.

Mortgage Guidelines On Jumbo Loans

Mortgage companies that lend on jumbo loans do not follow a set of agency mortgage guidelines. Jumbo mortgage lenders have their own lending requirements. Jumbo mortgages are portfolio loans. Portfolio loans do not have to conform to Fannie Mae and/or Freddie Mac agency guidelines.

How Do Jumbo Mortgage Lenders Set the Minimum Jumbo Loan Requirements 

Jumbo mortgage lenders either hold the loans they originate and fund in their own portfolio or may sell them to hedge funds or other third-party buyers of mortgage-backed securities. Lenders of jumbo loans often have the flexibility to exempt certain lending requirements and/or make changes to their jumbo loan program requirements since they are portfolio lenders. For example, a jumbo lender may waive the reserve requirements or lower their credit score requirements if the subject borrower shows strong compensating factors. Other factors lenders can waive are a higher debt to income ratio, lower down payment requirement, or taking non-qualifying income as a strong compensating factor. There are jumbo lenders who can cross collateralize multiple properties to get the deal done.

90% LTV Jumbo Mortgage With 660 Credit Score And 50% DTI

One of the most popular jumbo loan programs at Gustan Cho Associates is the 90% LTV Jumbo Mortgage with a 660 credit score and 50% debt to income ratio. This is a traditional full doc jumbo mortgage loan program and not too many lenders offer this unique jumbo loan program. Gustan Cho Associates also has non-QM jumbo mortgages with credit scores down to a 500 FICO. The lower the credit scores, the higher the down payment requirement.

Qualifying For Bank Statement Jumbo Loans For Self-Employed Borrowers

Self-employed borrowers qualifying for jumbo loans with low credit scores are in luck. Gustan Cho Associates offers Jumbo bank statement mortgage loans for self-employed borrowers. No tax returns are required.

Twelve months of bank statement deposits are used. Bank Statement Mortgage Loans For Self Employed Borrowers has no loan limits. Requires a 10% down payment on a home purchase. 12 months of bank statement deposits are averaged to derive income. Withdrawals do not count.

Gustan Cho Associates also offers non-QM and traditional 10% down payment Jumbo loan programs with no required private mortgage insurance. However, to qualify for a 10% down payment non-QM bank statement jumbo loan, the borrower needs at least a 700 credit score.  We also offer NON-QM Loans one year after bankruptcy, foreclosure, deed-in-lieu of foreclosure, or short sale. There are no maximum loan limits, and no private mortgage insurance is required on non-QM loans. Non-QM mortgage rates depend on the borrower’s credit scores and down payment.

Qualifying For Bank Statement Jumbo Loans For Seld-Employed Borrowers

Similar Posts

Leave a Reply

Your email address will not be published. Required fields are marked *